Pound coins

Pound Undermined by BoE Comments, US Dollar Rallies as Fed Strikes Hawkish Tone

The Pound fell against its stronger rivals this week amid a pullback in Bank of England (BoE) interest rate hike bets.

Meanwhile, the US Dollar recouped last week’s losses amid a risk-off mood and hawkish comments from the Federal Reserve.

Pound Dented by Dovish BoE Comments

GBP/EUR – Down one cent on the week’s opening levels

GBP/USD – Down over a cent on the week’s opening levels

After starting the week strong, the Pound soon began to weaken after Bank of England Chief Economist Huw Pill signalled the possibility of interest rate cuts as early as next summer.

A lack of data left Sterling vulnerable to volatility throughout much of the week, while better-than-expected GDP data on Friday failed to lift the currency. Overall, GBP slipped against its stronger peers while facing mixed movement elsewhere.

Next week brings plenty of high-impact data, with the UK’s consumer price index on Wednesday the focus. Could a sharp cooldown in inflation dent BoE bets, thereby seeing Sterling slide?

Euro Limited by Weak Data

EUR/GBP – Up almost a penny on the week’s opening levels

EUR/USD – Down half a cent on the week’s opening levels

The Euro initially rose this week after German factory orders beat forecasts, although a contraction in German industrial production then stifled EUR’s upside potential.

Weak Eurozone retail sales and gloomy comments from some European Central Bank (ECB) officials then put pressure on the Euro as the week went on, but the safer single currency managed to climb against its riskier rivals amid a souring market mood.

One of the few impactful Eurozone releases due out next week is Germany’s latest economic sentiment index. If the reading returns to positive territory for the first time since April, EUR could climb.

US Dollar Rallies following Hawkish Fed Comments

USD/GBP – Up one penny on the week’s opening levels

USD/EUR – Up half a cent on the week’s opening levels

The US Dollar suffered a lacklustre start to the week in the wake of Friday’s dire non-farm payrolls report.

Risk appetite waned as the week went on, helping the safe-haven ‘Greenback’ recover. A hawkish speech from Federal Reserve Chair Jerome Powell then propelled USD higher in the latter part of the session.

Next week, the US CPI is the key focus for USD investors. Signs of stubborn inflation could see the US Dollar soar, while a cooldown would likely dent the currency.

Australian Dollar Slumps despite RBA Rate Hike

AUD/GBP – Down half a penny on the week’s opening levels

AUD/USD – Down a cent and a half on the week’s opening levels

The Australian Dollar tumbled this week, despite the Reserve Bank of Australia (RBA) raising interest rates after four consecutive months of inactivity.

A hawkish policy outlook from the RBA offered AUD scant support, as markets don’t see another rate rise in the near future. This left the risk-sensitive ‘Aussie’ exposed to a sharp deterioration in market risk appetite.

Looking forward, Australian labour data next week could drive AUD movement. Will signs of a slowing jobs market dampen RBA bets, thereby pushing the ‘Aussie’ lower?

Key Data

Nov 13 AUD Westpac Consumer Confidence Index (Nov)

Nov 14 AUD NAB Business Confidence (Oct)

Nov 14 GBP Unemployment Rate (Sep)

Nov 14 GBP Average Earnings (Sep)

Nov 14 EUR Growth Rate QoQ (Q3)

Nov 14 EUR DE ZEW Economic Sentiment Index (Nov)

Nov 14 USD Inflation Rate (Oct)

Nov 15 GBP Inflation Rate (Oct)

Nov 15 EUR Industrial Production (Sep)

Nov 15 USD PPI (Oct)

Nov 15 USD Retail Sales (Oct)

Nov 16 AUD Unemployment Rate (Oct)

Nov 17 GBP Retail Sales (Oct)